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Thursday, 11 April 2019

Islamic finance rules binding on civil courts — Federal Court, Malaysia



11 April 2019 (The Edge Markets)


PUTRAJAYA: In a landmark decision, the Federal Court has ruled that the findings on Islamic finance by Bank Negara Malaysia’s Syariah Advisory Council (SAC) are binding on civil courts. 

A nine-member bench, in a narrow 5-4 decision, also ruled that the ascertainment of Islamic law by the SAC does not amount to a judicial decision.

The dissenting justices included Chief Justice (CJ) Tan Sri Richard Malanjum, Chief Judge of Malaya Tan Sri Zaharah Ibrahim, Chief Judge of Sabah and Sarawak Datuk David Wong Dak Wah, and Federal Court Judge Justice Tan Sri Idrus Harun.

Federal Court judge Datuk Mohd Zawawi Salleh wrote the majority judgement and it was also accepted by the Court of Appeal President Tan Sri Ahmad Maarop and Apex court Judges Tan Sri Ramly Ali, Tan Sri Azahar Mohamed and Datuk Alizatul Khair Othman Khairuddin. 

The majority held that the rulings by the SAC constitute an expert opinion in the matter of Islamic finance.

“The SAC members are highly qualified in the fields of syariah economics, banking, law and finance,” Justice Zawawi said.

The SAC could be referred to so as to ascertain which opinion or jurist was most applicable.

“It is for the courts to apply the ascertained Islamic law to the facts of the case. The final decision on the matter remains with the court,” the judge added.

The full nine-member bench was delivering on the decision in the referral by JRI Resources Sdn Bhd against Kuwait Finance House (KFH).

KFH filed a civil lawsuit in 2013 against JRI to claim RM118.82 million relating to four Ijarah Facilities agreements and one Murabahah Tawarruq agreement entered between them in 2008 and 2009. KFH also made a claim against three guarantors.

JRI referred several questions for the Federal Court to decide, namely whether Sections 56 and 57 of the Central Bank of Malaysia Act 2009 were constitutional or impinged on judicial power, as the sections stated that rulings by the SAC bind the civil High Court.

Justice Malanjum ruled Section 57 as unconstitutional, as judicial power cannot be removed from the judiciary, but the majority ruled otherwise.

“The effect of the section is to vest judicial power in the SAC, to the exclusion of the High Court in syariah matters. The section must be struck down as unconstitutional and void,” the CJ said.

JRI counsel Datuk Malik Imtiaz Sarwar, in commenting on the decision, said it was telling that Justices Malanjum, Zaharah, Wong and Idrus concluded that the provisions that made the SAC rulings binding on the courts were self-evidently an usurpation of judicial power.

“That they thought the provisions resulted in unfair trials in which the litigants were denied the opportunity to test material evidence and make submissions is even more so.

“Though the majority of the court upheld the validity of the provisions, the strong view of the minority is reason enough for the attorney general and the government to consider whether the legislative framework should be amended.

“The CJ noted that there are other methods by which certainty can be achieved which do not impinge on judicial power. This is something that should be seriously looked at,” Malik said.

11 April 2019 (The Edge Markets)

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